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If there is one sector that would be expected to take a beating as a result of the widespread economic malaise, it is luxury goods. And yet Fazal Chaudhri, group finance director of Exelco, an Antwerp-based diamond manufacturer, distributor and retailer, says that year-on-year sales were up in February. To be sure, diamond prices have fallen significantly and the finance chief isn’t willing to call it a sign of imminent recovery. However, he considers himself “cautiously optimistic” that economic conditions will soon improve.

He isn’t alone. Around the world, confidence is creeping back among CFOs, according to the latest poll of senior finance executives by CFO Europe, Tilburg University and Duke University. When it comes to economic prospects, the balance of optimists with pessimists improved in the first quarter of this year in all of the regions surveyed. (See charts below.) This is the first time since 2006 that the survey has recorded such a concerted improvement in confidence. That said, pessimists still comfortably outnumber optimists, so while the latest results may signal that the worst is over, the road to recovery will be long and painful.

After all, despite the generally brighter mood, CFOs continue to slash forecasts for earnings, hiring and capital spending. In Europe, finance chiefs at listed firms expect earnings to plunge by more than 10% over the coming year, compared with the 8% decline predicted in the previous quarter. In response, planned cuts to domestic workforces (8%) and capital spending (16%) will be deeper than previously indicated. Capex cuts are expected to be particularly severe—only two quarters ago, CFOs said annual spending would grow—and could get even worse, according to a recent note from Morgan Stanley’s European equity analysts. They expect capital spending at the Continent’s industrial companies to fall by 30% over the coming year, “with no recovery before mid-2010 due to weak demand, depressed business sentiment, [the] ongoing credit crunch and earnings recession.”

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At Exelco, Chaudhri has delayed some capex and marketing plans, in addition to enforcing a hiring freeze. “The normal things,” he says. Indeed, more than half of CFOs surveyed expect to freeze hiring and wages over the next 12 months, according to our survey. For Chaudhri, these actions are designed to avoid “large-scale layoffs that will hamper our ability to grow in the future.” Though the company recently closed one of its UK offices, with its functions absorbed into an offshore centre in Mauritius, Exelco has avoided many more redundancies by battening down the hatches before its key markets lurched downwards at the end of 2008.

Last summer, Chaudhri thought that the rough-diamond market was overpriced compared with the polished market, usually a signal of trouble ahead. With signs of poor Christmas trading also looming, the CFO “sold as much stock as possible and brought down new purchases,” he recalls. The hiring freeze and other actions came after, as prices for rough-cut diamonds fell by 50% or more in some cases. The market “seems to be finding a floor,” the CFO says, though building a budget or plan based on that assumption is premature. These days, forecasting is “like driving in the dark,” Chaudhri says. “You don’t want to accelerate around corners.” Put another way, his company will continue to concentrate on the basics-“making sure manufacturing is tight, supplying only customers who can pay and cutting superfluous costs”-until it sees more signs that conditions are improving.

In what is becoming a common refrain, Chaudhri says that there can be little doubt that his own personal profile has improved greatly. The financial crisis has “done CFOs’ profile a favour,” he says. Before, local managers usually waited until he called them to discuss their performance. Now, the finance chief is fielding calls from around the world seeking advice and support on a range of strategic issues. He is using this increased clout to advance cost-consciousness throughout the company. When the CFO says that cash must be saved or jobs will go, employees listen.

Staff at Exelco’s factory in Botswana recently saved money by bringing catering in-house, which the CFO cites as one example of how carefully employees are examining every line-item in their budgets. Though he relishes his larger role in devising corporate strategy, Chaudhri knows that “execution comes from small decisions made on the ground.” If there is a silver lining to the downturn, it’s that “when people are under pressure, they get creative” in finding ways to save cash, Chaudhri says. “If only you could get that sense of urgency during good times.”